Entrepreneurs who provide capital for the start-up of a business or for the expansion of an existing business are known as angel investors (also known as business angels, informal investors, angel funders, private investors, or seed investors). Angel investors provide wealth in exchange for convertible debt or ownership equity. Starting in the early stages of a company's development (when the chances of it failing are quite high) and when the majority of investors are not willing to back them, angel investors are often the first to provide a hand. The number of angel investors investing online via equity crowdfunding is modest, but growing. Angel investors often organise themselves into groups or networks to pool investment funds as well as to give advise to the firms in which they have invested their money. A significant growth in the number of angel investors has occurred during the previous 50 years.
The word "angel" was first employed in the context of Broadway theatre, when it was used to characterise affluent people who gave funds to support theatrical enterprises that would otherwise have been forced to close. When William Wetzel, then a professor at the University of New Hampshire and the director of the Center for Venture Research, produced a groundbreaking research on how entrepreneurs received seed financing in the United States in 1978, he was considered a pioneer in the field. He started referring to the investors who helped them as "angel investors" to characterise them. In the arts, a phrase that is close to "patron" is widely used.
Angel investors are often retired entrepreneurs or executives who are interested in angel investment for a variety of reasons other than just financial gain. For example, keeping up with current advances in a specific business sphere, mentoring another generation of entrepreneurs, and making use of their knowledge and networks on a part-time basis are all reasons why people work part-time in their field of expertise. Because innovations are more often developed by outsiders and founders in startups than by established companies, angel investors give comments, advise, and connections in addition to funding. They are also known as "angel investors." Private companies meet angel investors in a variety of ways due to the lack of a public market for their securities. These methods include recommendations by trusted sources and other business contacts, attendance at investor conferences and symposia, and participation in meetings organised by groups of angels, where companies pitch directly to investors in face-to-face meetings.
In 2007, as per the Center for Venture Research, there have been 258,000 active angel investors in the United States, up from the previous year. In accordance with research conducted by the US Small Business Administration, the number of persons in the United States who made an angel investment between 2001 and 2003 ranged between 300,000 and 600,000, depending on the source of information. When angel investors began to organise themselves into informal groups in the late 1980s, they did so with the intention of sharing deal flow and due diligence work, as well as pooling their capital to make bigger investments. It is common for angel groups to be local organisations comprised of 10 to 150 certified investors who are interested in early-stage financing. In 1996, there were around ten angel organisations in the United States of America. As of 2006, there were more than 200 of them.